Fact Pattern: Jensen Corporation’s board of directors met on June 3 and declared a regular quarterly cash dividend of $.40 per share for a total value of $200,000. The dividend is payable on June 24 to all stockholders of record as of June 17. Excerpts from the statement of financial position for Jensen Corporation as of May 31 are presented as follows. Cash $   400,000 Accounts receivable (net) 800,000 Inventories 1,200,000     Total current assets $2,400,000     Total current liabilities $1,000,000    Assume that the only transactions to affect Jensen Corporation during June are the dividend transactions. Question Jensen’s quick (acid test) ratio would be A.Decreased by the dividend declaration and increased by the dividend payment. B.Unchanged by the dividend declaration and decreased by the dividend payment. C.Unchanged by either the dividend declaration or the dividend payment. D.Decreased by the dividend declaration and unchanged by the dividend payment.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Fact Pattern:
Jensen Corporation’s board of directors met on June 3 and declared a regular quarterly cash dividend of $.40 per share for a total value of $200,000. The dividend is payable on June 24 to all stockholders of record as of June 17. Excerpts from the statement of financial position for Jensen Corporation as of May 31 are presented as follows.
Cash
$   400,000
Accounts receivable (net)
800,000
Inventories
1,200,000
 
 
Total current assets
$2,400,000
 
 
Total current liabilities
$1,000,000
 
 
Assume that the only transactions to affect Jensen Corporation during June are the dividend transactions.

Question

Jensen’s quick (acid test) ratio would be

  • A.Decreased by the dividend declaration and increased by the dividend payment.
  • B.Unchanged by the dividend declaration and decreased by the dividend payment.
  • C.Unchanged by either the dividend declaration or the dividend payment.
  • D.Decreased by the dividend declaration and unchanged by the dividend payment.
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